January 28, 2008

Is It OK to Walk Away?

In case you’ve missed it, there has been a protracted discussion taking place over at the L.A. Times’ L.A. Land blog.  The topic:  When you’re upside-down in your house, is it acceptable to abandon it?

The discussion started with a comment by a woman calling herself Condoblue, who revealed that she was planning to walk away from her condo because it had declined in value from $500K to $350K:

“I realize I agreed to the deal when I signed the mortgage papers, but I am within my rights to walk away from a bad deal and suffer the consequences, just as many corporations write down billions of dollars of debt, lose money for their shareholders, and lay off people as a result of their bad decisions.” 

The firestorm of comments that followed debated whether choosing to walk away from a bad investment was a moral decision or a financial one. Some people called her a scumbag for not living up to her end of the bargain.  But the majority of commenters argued in Condoblue’s favor, as reflected in this poll on the site.  They said it was a financial deal gone sour, and Condo was right to walk away, just as developers abandon projects when the market turns south.

Well, things had almost calmed down when Condoblue wrote in and explained herself further.  She detailed how she had entered into a purchase agreement on another home and planned to stop making payments on House #1 as soon as she closed on House #2.  She also said that the mortgage lender on House #2 didn’t even inquire about the status of House #1.  So much for tighter restrictions on credit. She also noted that she could have elected to stay in House #1, because she could afford the payments but decided it wasn’t worth it.

“I realize my credit score will take a hit, but remember that I don’t need to rent since I own House #2. I have stable long-term employment, decent car, and no debt so speak of.”

I see the point about walking away from a home being a financial decision, not a moral one.  But I can’t support Condoblue in walking away from a house that she could still afford to pay for, and then buying another house.  If she doesn’t like this one, does she walk away from that one, too?

Of course, this being Hollywood, Condoblue was invited to appear on a radio show on Monday to offer her perspective on the housing fiasco.  Click here for an audio link.  Walk away from your house and become a star!

Recent Redfin posts:

Just Added to the Inventory (And All About [LAX] Soundproofing)

A Short Sale in West Hollywood Vicinity

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